Question

Examination of the monetary policies in place at the start of the 2007-2017 period in relation to their effects on macroeconomic issues. In other words, Can you briefly describe the monetary policy of the period leading into the decade (i.e., prior to 2007). Was it expansionary or contractionary?

What specific monetary policy actions were undertaken during the 2007-2017 period. Were interest rates raised or lowered during the 2007-2017 period? Did the Fed use other instruments, including open market operations and reserve requirement? Was the monetary policy expansionary or contractionary?

Analysis of the impact of the monetary policy actions undertaken during the 2007-2017 period on individuals and businesses within the economy. Here you could talk about credit to private sector (whether it went up or down during that time period), etc. A graph with this metric could to illustrate this.

Answer 1

Before 2007, roughly around 2005vand 2006 US had entered as robust economy with high inflation and growth and as results contractionary monetary policy was adopted where interest rates were raised gradually from 3.5 percent to 5 percent over four quarters. To curb inflation and spike in wages and reduce aggregate demand this policy was adopted.

However post 2007 to 2017 we witnessed great recession of 2008 which shocked the economy due to cheap cresit available from Asian economies and housing boom. This crashed and led to financial crisis and unemployment levels touched as high as 8 percent . Inflation was as low as 2 percent and hence Us adopted Expansionary monetary policy through reducing interest rates to Zero levels. The interest rates were next to 0.25 per cent till 2016 because of quantitative easing program and Buyback of Mortgages backed securities through OMO( Open Market Operations). With also adopting fiscal stance the government bailed out economy with 800 billion dollar stimulus package. The economy was finally stable after 2011. The private sector credit as per US Federal statistics were 5800 billion dollars in 2008 and finally increased to 8100 billion dollars in 2017.